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Dear US retirees,
84% of retirees are making the same RMD mistake.
Not a small mistake. Not a paperwork error.
A wealth-destroying habit hiding inside the most conservative possible behavior.
Here is the story.
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What JPMorgan Found.
JPMorgan Chase studied 31,000 people entering retirement between 2013 and 2018.
What they found was striking.
84% of retirees who had reached RMD age were taking only the minimum required distribution. Nothing more.
And 80% of pre-RMD retirees had not touched their accounts at all.
The instinct makes sense. Preserve capital. Let it grow. Take as little as possible.
Sounds smart.
It is not always smart.
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What an RMD Actually Is.
Quick reminder before we go deeper.
An RMD is the minimum amount the IRS requires you to withdraw from your tax-deferred retirement accounts each year after age 73.
Traditional IRA. 401(k). 403(b). SEP-IRA. All subject to RMDs.
Roth IRAs are exempt. That matters. We will come back to that.
The formula is simple. Take your account balance as of December 31st of the prior year. Divide by your IRS life expectancy factor.
Example. You are 75 years old. Life expectancy factor: 22.9. Account balance: $250,000. Your RMD is $10,917.
That is the floor. The minimum. Not the ceiling.
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The Trap Inside Playing It Safe.
Here is where most retirees go wrong.
They treat the RMD as a target. Not a floor.
They take exactly $10,917 and stop.
They feel disciplined. Responsible. Like they are protecting their nest egg.
JPMorgan's researchers put it plainly: "The RMD approach tends to generate more income later in retirement and can even leave a sizable account balance at age 100."
Sounds good. Right?
Not necessarily.
The Math Nobody Talks About.
JPMorgan ran the numbers on a 72-year-old with $100,000 in retirement savings.
Using the RMD-only approach, that retiree still has more than $20,000 sitting in the account at age 100.
Sounds like a win.
But the same retiree using a spending-matched withdrawal strategy could have spent more money every year from age 72 all the way to age 87.
Fifteen extra years of living better.
More travel. More experiences. More helping the grandchildren when it matters most.
Not at age 100 when you may not have the health or energy to use it.
Now.
When you are active, healthy, and still want to live.
The Tax Trap Hiding in Plain Sight.
Here is the second problem with RMD-only withdrawals.
Every dollar sitting in your traditional IRA grows tax-deferred.
Sounds great.
But it also means every dollar you eventually withdraw gets taxed as ordinary income.
The longer you leave it in there, the bigger the balance grows.
The bigger the balance, the larger your future RMDs.
The larger your future RMDs, the higher your taxable income in your 80s and 90s.
Which means higher tax brackets. Potentially higher IRMAA Medicare surcharges. Potentially higher taxation on your Social Security benefits.
You spent decades deferring taxes.
But deferring is not avoiding. The bill is still coming.
The retiree who takes only the minimum RMD today may be handing their future self a much larger tax problem.
A financial advisor can model exactly what that looks like for your specific situation. More on that in a moment.
The Roth Conversion Opportunity.
Here is the move most people in the RMD-only camp are missing entirely.
If you have years where your taxable income is lower, those are the years to consider converting a portion of your traditional IRA into a Roth IRA.
Pay the tax now, at your current lower rate.
Grow it tax-free from that point forward.
No future RMDs on the Roth balance.
No taxable income spike in your 80s.
No IRMAA trap triggered by a balance that grew untouched for twenty years.
This is not a strategy that works for everyone. The numbers have to be right for your specific situation.
But the retirees who are blindly taking only their minimum RMD every year without considering Roth conversions are leaving a significant optimization on the table.
The Penalty for Getting It Wrong.
One more thing worth knowing.
If you fail to take your full RMD in any given year, the IRS levies a penalty of 25% of the amount not taken.
Not 10%. Not a slap on the wrist.
Twenty-five percent.
Miss $10,000 of required distributions and you owe the IRS $2,500 before you spend a dollar of it.
The RMD rules are unforgiving. They have specific deadlines. Specific calculations. Specific exceptions for certain account types.
This is not the area of your financial life to wing it.
What Empowered Retirees Do.
They do not just take the minimum and move on.
They ask better questions.
How much should I actually be withdrawing this year based on my real spending needs?
Would a partial Roth conversion this year reduce my tax bill in five years?
Am I managing my withdrawals to stay under the IRMAA threshold?
Is my current withdrawal strategy leaving me broke at the right time, meaning at the end of my life, not twenty years before it?
These are not questions you answer alone with a calculator and a guess.
They are questions you answer with a qualified financial advisor who understands your full picture.
The Right Advisor Changes Everything.
We talk about empowerment here every day.
Building wealth. Playing offense. Not being scared.
But there is a difference between being empowered and being reckless.
The most empowered thing you can do with a complex RMD strategy is get professional eyes on your specific numbers before December 31st.
Not a generic article. Not a calculator. A real advisor who can model your situation specifically.
WiserAdvisor matches you with pre-screened, qualified financial advisors in your area. No cold calls. No pressure. Just a curated match based on your specific situation and needs.
It is free to get matched.
The RMD deadline is December 31st.
The conversation to have with an advisor is now, not December 28th.
The Bottom Line.
84% of retirees are treating the RMD minimum as the finish line.
It is the starting line.
The retirees who thrive are the ones who optimize above it. Who convert strategically. Who spend intentionally while they still have the health to enjoy it.
Do not die with $20,000 in an IRA because you were afraid to spend it at 75.
That is not wealth preservation.
That is fear wearing a suit.
Stay sharp.
— US Retirement Report
This newsletter is for informational and educational purposes only and does not constitute financial, tax, or investment advice. Please consult a qualified financial advisor before making any decisions.
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